Lowe's (LOW) Home improvements Business to Keep Gaining in 2021

Zacks Equity Research
·4-min read

The year 2020 was mostly about at-home stay, thanks to the coronavirus pandemic-led social distancing norms. Making homes well equipped for work-from-home, remote schooling as well as entertainment needs gained predominance. This led to increased renovation and maintenance projects. The scenario turned out to be an upside for several home improvement market players such as Lowe’s Companies, Inc. LOW. Higher demand across most merchandising categories and strong online services are supporting the company’s top line.

Industry experts believe that home improvement companies are likely to keep gaining in 2021, as work-from-home trends persist along with other supporting factors like rapid urbanization. That said, let’s take a closer look at the factors that are acting as aces in Lowe’s Stack.

Favorable Demand Keeps Matters Bright

Prudent measures to widen assortments are helping Lowe’s to meet the increased demand conditions and emerge as a strong player in the home improvements arena. During third-quarter fiscal 2020, Lowe’s comparable sales in the U.S. home improvement business rallied 30.4%. Home improvements business was fueled by broad-based growth across all merchandising departments, DIY (do-it-yourself) and pro customers as well as growth in store and online. In fact, all 15 merchandising departments delivered positive comparable sales (comps), exceeding 15%. Growth in lumber was the strongest, backed by demand from pro and DIY customers. Notably, the company witnessed growth in areas such as home decor, lawn and garden as well as seasonal and outdoor living.

Moreover, the company’s latest Total Home strategy targets to provide everything that homeowners need for renovation and remodeling work in every area of the house. The offerings are likely to benefit both Pro and DIY customers. The strategy includes boosting offerings across all categories of home decor, including simple and complex installations as well as paint. Management highlighted that the new strategy is likely to strengthen customer engagement and market share, especially through the intensified focus on Pro customers.

Strong Omni-Channel Presence

Lowe’s online sales are rapidly growing on the back of consumers’ enhanced inclination toward digital transactions as well as the company’s sturdy omni-channel offerings. Notably, sales in lowes.com surged 106% in fiscal third quarter, wherein online penetration was 7% of total sales. Increased demand from DIY and pro customer toward contactless shopping options is driving the company’s online sales.

The company focuses on enhancing customers’ online shopping experience by improving services such as online delivery scheduling, search and navigation features as well as order tracking. Speaking of delivery capabilities, the company is on track with installing Buy Online Pickup in Store self-service lockers across all U.S. stores. Going ahead, management believes that its online business model has tremendous potential to grow, backed by an efficient technology team and superior cloud-based platform.

Wrapping Up

We expect Lowe’s to keep gaining from consumers’ continued inclination toward home improvements, core-repair and maintenance activities in 2021. In fact, demand for products related to DIY projects is likely to stay high.  Also, the company’s efforts to enhance online shopping and delivery systems are worth applauding.  Markedly, this Zacks Rank #3 (Hold) company’s shares have gained 21.9% in the past six compared with the industry’s 15% rise.

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